Some 95% of non-Public Interest Entity audits reviewed at the largest seven firms in 2022/2023 were rated ‘good’ or ‘generally acceptable’, ICAEW’s Professional Standards Department’s annual Audit Monitoring Report has found.
It is the best performance recorded by those firms in inspections by ICAEW’s Quality Assurance Department.
The report recorded a slight dip in the overall quality of audits reviewed in 2022/23 across all firms compared to the previous year, but noted that the population of firms reviewed was very different. ICAEW said it was too early to determine whether this year’s drop in average audit quality would develop into a longer-term concern.
It encouraged firms to use their significant investment to implement ISQM quality management policies and procedures, particularly in respect of monitoring and remediation.
Areas for improvement
Reviewers continued to identify common issues across audits, ICAEW said. The more challenging elements of audits – such as groups, stock, valuations and revenue – were key drivers where improvement or significant improvement was required. ICAEW also identified a lack of technical knowledge, flawed audit testing and inadequate reviews by managers or partners, so coaching and training at audit firms should remain an important priority.
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ICAEW audit registration committee chair, Rama Krishnan, said: “We were very pleased to see that 95% of non-PIE audits at the biggest firms were good or generally acceptable. This is the best set of results we have seen for these firms and highlights the investments they have made.
“While it was disappointing to see a slight drop in the results across all firms, overall audit quality remains good.
“ICAEW will continue to work with all of our firms to identify the key drivers where audits require improvements and encourage them to conduct root cause analysis to deliver progress.”